1.  Background

Members are aware that the Service Tax paid by exporters on notified post manufacturing services are currently reimbursed as per provisions of Service Tax Notification No.17/2009 dated 7th July 2009.  Considering the procedural hurdles faced by the exporters in availing the refund and also the lengthy documentation involved, the Hon’ble Union Minister of Finance had announced in the Union Budget 2011-12 that a scheme for refund of Service Tax on the lines of Duty Drawback will be introduced.

Accordingly, the Central Board of Excise and Customs (CBEC) had recently issued a Service Tax Circular No.149/18/2011-ST dated 16th December 2011 (which was circulated to members vide CLE circular dated 19th December 2011) outlining the details of the simplified scheme of refund of Service Tax.  As per this scheme, the exporter has two options. The first option is to get the refund on the lines of Duty Drawback according to the Schedule of Service Tax. In this case, exporters who are already availing Drawback can get the refund through their existing bank account itself through ICES mode but should mention the first two digit/four digit chapter/sub-heading number of service tax schedule in the shipping bill and should also register their Central Excise/Service Tax Code Number with the Customs ICES through submission of an application in the prescribed format.  The second option is to get reimbursement through submission of documents to the Central Excise/Service Tax field formations by declaring Service Tax chapter/sub-heading number as 9801 in the electronic shipping bill.

 2.   Notification of the simplified Service Tax refund Scheme

The CBEC has now issued a Service Tax Notification No. 52/2011 dated 30th December 2011 (copy enclosed) notifying the simplified Service Tax refund scheme,  which contains detailed procedural guidelines for availing refund either by way of schedule of rates or through submission of documents. This scheme will come into effect from January 3, 2012.

3.  Service Tax refund Scheme through Schedule of Rates

The highlights of this scheme are given below.

• manufacturer-exporter, who is registered as an assessee under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder shall register his central excise registration number and bank account number with the customs; Exporter who is not so registered under these provisions shall register his service tax code number and bank account number with the customs. Members may recall that Service Tax Circular No. 149/18/2011-ST dated 16th December 2011 specified the format for registering the service tax code number with Customs.


• Service tax code number shall be obtained by filing a declaration in Form A-2 to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the registered office or the head office, as the case may be, of such exporter; Format of form A-2 has been given in the aforementioned Service Tax Notification No. 52/2011 dated 30th December 2011


• The exporter shall make a declaration in the electronic shipping bill or bill of export, as the case may be, while presenting the same to the proper officer of customs, to the effect that-


1. the refund of service tax paid on the specified services is claimed as a percentage of the declared FOB value of the said goods, on the basis of rate specified in the Schedule;


2. no further refund shall be claimed in respect of the specified services, under procedure specified in paragraph 3 or in any other manner, including on the ground that the refund obtained is less than the service tax paid on the specified services;

• service tax paid on the specified services eligible as refund under this exemption, shall be calculated by applying the rate specified for goods of a class or description, in the Schedule, as a percentage of the FOB value of the said goods. Amount so calculated as refund shall be deposited in the bank account of the exporter;


• Shipping bill or bill of export on which refund has been claimed on the basis of rate specified in the Schedule, is not eligible for refund claim on the basis of documents;


• Where the refund involved in a shipping bill or bill of export is less than rupees fifty, the same shall not be allowed;

The schedule of Service Tax refund rates concerning leather sector falling under Chapter 41, 42, 43 and 64 is given below.

4.  Service Tax refund through submission of documents

• The manufacturer-exporter, who is registered as an assessee under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder, shall file a claim for refund of service tax paid on the specified service to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the factory of manufacture in Form A-1;


• The exporter who is not so registered under the provisions referred to in clause (d), shall before filing a claim for refund of service tax, file a declaration in Form A-2, seeking allotment of service tax code, to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the registered office or the head office, as the case may be, of such exporter;


• The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall, after due verification, allot a service tax code number to the exporter referred), within seven days from the date of receipt of the said Form A-2;


• On obtaining the service tax code, exporter shall file the claim for refund of service tax to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the registered office or the head office, as the case may be, in Form A-1;


• The claim for refund shall be filed within one year from the date of export of the said goods.


• Where the refund involved in a claim is less than rupees five hundred, the same shall not be allowed;


• Where the total amount of refund sought under a claim is upto 0.25% of the total FOB value of export goods and the exporter is registered with the Export Promotion Council sponsored by Ministry of Commerce or Ministry of Textiles, Form A-1 shall be submitted along with relevant invoice, bill or challan, or any other document including documents specified in Service Tax Notification No. 52/2011 for each taxable service, in original, issued in the name of the exporter, evidencing payment for the specified service used for export of the said goods and the service tax payable, certified in the manner specified in sub-clauses (A) and (B);


1. if the exporter is a proprietorship concern or partnership firm, the documents enclosed with the claim shall be self-certified by the exporter and if the exporter is a limited company, the documents enclosed with the claim shall be certified by the person authorised by the Board of Directors;


2. the documents enclosed with the claim shall also contain a certificate from the exporter or the person authorised by the Board of Directors, to the effect that specified service to which the document pertains has been received, the service tax payable thereon has been paid and the specified service has been used for export of the said goods under the shipping bill number;

• Where the total amount of refund sought under a claim is more than 0.25% of the total FOB value of export goods, the procedure specified above shall stand modified to the extent that the certification prescribed thereon, in sub-clauses (A) and (B) shall be made by the Chartered Accountant who audits the annual accounts of the exporter for the purposes of the Companies Act, 1956 (1 of 1956) or the Income Tax Act, 1961(43 of 1961), as the case may be;

5.   Recovery of Service Tax refund

Where any refund of service tax paid on specified service utilized for export of said goods has been allowed to an exporter but the sale proceeds in respect of said goods are not received  by or on behalf of the exporter, in India, within the period allowed by the Reserve Bank of India under section 8 of the Foreign Exchange Management Act, 1999 (42 of 1999), including any extension of such period, such refund shall be deemed never to have been allowed and recovered under the provisions of the said Act and the rules made thereunder, as if it is a recovery of service tax erroneously refunded;

Members may kindly note the above

With regards  

ALI AHMED KHAN
Executive Director
COUNCIL FOR LEATHER EXPORTS